After Tuesday night’s Budget announcement, we would like to highlight some of the notable proposals that the Government intends to enact.
Superannuation
Overall, there will be an increased ability to contribute to superannuation through:
Removal of the work test From 1 July 2022, individuals up to age 74 years will be allowed to make voluntary after-tax contributions or salary sacrifice super contributions without meeting the work test. We note that while this is beneficial, the requirement to have a Total Superannuation Balance of less than $1.7m remains before a voluntary after-tax contribution may be made. We will be reviewing each clients’ strategy in relation to this change as the ability to contribute further funds to superannuation can be very attractive.
Downsizer contribution The Government will reduce the minimum age requirement for the downsizer contribution from 65 to 60 from 1 July 2022. This extends the $300,000 (each owner/part owner) that may be contributed. Further, there is no requirement to have less than $1.7m in superannuation to make this contribution.
First Home Super Saver Scheme From 1 July 2022 the Government will increase the amount of super savings available to first home buyers from $30,000 to $50,000. Per current rules, only voluntary contributions may be released (not employer) so some forward planning is required to take advantage of this scheme.
Self Managed Superannuation Fund residency requirements The Government will amend the residency requirements to make it easier for SMSFs to maintain their complying status when members move overseas.
Individual Tax Benefits
Individual tax benefits were predominately a carry forward of previous tax initiatives for lower and middle income earners. Of note are the following:
Extension of Low and Middle Income Tax Offset The extension of LMITO for another income year will deliver tax cuts of up to $1,080 for those with taxable incomes between $37,000 and $126,000.
Increasing the Medicare Levy Low Income Threshold The Government will increase the Medicare levy low-income thresholds for singles, families, seniors and pensioners from FY21 onwards. This will see retirees with Taxable Income of less than $36,705 (single) or $51,094 (couple) avoid the 2% Medicare Levy.
Simplifying Self-Education Tax Deduction The Government intends to remove a $250 reduction to effectively allow individuals to claim a tax deduction for 100% of their self-education expenses.
Employee Share Schemes The Government will remove the cessation of employment taxing point for the tax-deferred Employee Share Schemes (ESS). In general, this will avoid a situation where a tax liability arises but the entitlement remains illiquid.
Business Tax Benefits
Extending Temporary Full Expensing Businesses with aggregated annual turnover of less than $50m (and in certain circumstances $5bn) will be able to deduct the full cost of certain capital assets (new depreciable assets and second-hand assets) from now until 30 June 2023.
Extending Temporary Carry Back Losses Certain corporate tax entities can apply tax losses against taxed profit in a previous year, generating a refundable tax offset in the year in which the loss was made.
Social Security & Aged Care
Aged Care was a focus with the announcement of a Five Pillar Program worth $17.7 billion dollars over five years. Of specific note is:
an additional 40,000 more Home Care packages and extra support for informal carers. Home Care is a program that provides care services to older Australians in their homes (further details here). There is currently extended wait times for many trying to access these services.
$10 per resident per day supplement to improve care and standards within residential Aged Care.
If you would like further information on these proposed changes or have questions on how they may impact you, please get in touch with your adviser and we will be happy to assist.
Disclaimer: This information is general in nature only and it does not constitute personal financial product advice. Before acting on general advice you should consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial or investment decision.